Goldman Stands by $1,050 Gold Target on Outlook for Recovery

Gold will resume a decline as U.S.
economic growth accelerates, according to Goldman Sachs Group
Inc., which reiterated a forecast for the metal to end the year
at $1,050 an ounce.

Bullion’s rally this year was spurred by poor U.S. data
probably linked to the weather and rising tension in Ukraine,
analysts led by Jeffrey Currie wrote in a report, describing the
reasons as transient. With the tapering of the Federal Reserve’s
bond-buying program, U.S. economic releases will return as the
driving force behind lower prices, he wrote.

Gold’s 12-year bull run ended in 2013 as the Fed prepared
to reduce monthly bond-buying that fueled gains in asset prices
while failing to stoke inflation. Prices rose 10 percent this
year even as the Fed cut purchases, with Russia’s annexation of
Crimea and mixed U.S. economic data boosting haven demand. Last
year, Currie described gold as a “slam-dunk sell” for 2014.

“It would require a significant sustained slowdown in U.S.
growth for us to revisit our expectation for lower gold prices
over the next two years,” Currie wrote in the report, dated
yesterday. “While further escalation in tensions could support
gold prices, we expect a sequential acceleration in both U.S.
and Chinese activity, and hence for gold prices to decline.”

Gold for immediate delivery traded 0.3 percent higher at
$1,322.01 an ounce at 7:43 p.m. in Singapore, according to
Bloomberg generic pricing, after the United Nations Security
Council met to address the Ukraine crisis. Bullion last traded
below $1,050 an ounce in February 2010.

Morgan Stanley

Bullion is the least preferred commodity among metals as
prices resume a decline this year on the outlook for rising U.S.
interest rates and low inflation expectations, Morgan Stanley
said in a report on April 8. Average prices are expected to drop
for the next four quarters, it said.

Stronger U.S. growth this year and next will help the world
economy withstand weaker recoveries in emerging markets,
according to the International Monetary Fund. The world’s
largest economy will expand 2.8 percent this year and 3 percent
in 2015, unchanged from forecasts in January, the IMF said in
its World Economic Outlook report last week.